PEEU 2021

Università Cattolica del Sacro Cuore di Milano – Master: Political Economy of the European Union

Prof. Domenico Delli Gatti (Università Cattolica) and Daniele Siena (Politecnico di Milano)

COURSE AIMS AND EXPECTED LEARNING OUTCOMES

The objective of the course is to provide the conceptual tools to understand (i) the institutional setup and present governance of the European Union; (ii) the main steps and current features of the European economic integration -- such as the Single Market – and the microeconomic and structural policies established in this field; (iii) the main steps and current features of the European monetary integration – with the establishment of the Economic and Monetary Union (EMU) and the rationale and working of the common currency; (iv) the main fiscal and monetary policy issues and challenges facing the EMU in the light of the Sovereign Debt and Covid-19 Crisis.

At the end of the course students will be able to:

- understand the governance of the European Union, knowing the history and current role of the main governing bodies and of the decision-making process (CILO 1.1 - knowledge);

- analyze, interpret and discuss conceptual issues and empirical evidence to evaluate the strengths and weaknesses of the European response to past, present and forthcoming crisis periods (CILO 3.1 – intellectual skill);

- develop the ability of critical decision making by assessing the micro and macro-economic consequences of structural, fiscal and monetary policies adopted by European institutions (CILO 1.5 – transferable skill);

- Intervene and communicate in European debates with the correct, technical, terminology (CILO 1.5 – transferable skill);

COURSE CONTENT

Module I: Prof. Domenico Delli Gatti

1. The history of European integration from the treaty of Rome to Brexit.

2. The essentials of foreign trade liberalization: the rationale of a customs union and of a Single market.

3. Governing bodies and decision making process in the European Union: centralized vs decentralized tasks.

4. The pro-competitive effect of market integration: the increase in the number of firms and the reduction of mark-ups.

Module II: Prof. Daniele Siena

1. Definition and rationale of a monetary/currency union.

2. The common monetary policy and the European Central Bank: design and performance.

3. Fiscal sovereignty, the Stability and Growth Pact and debt sustainability.

4. The European Sovereign Debt and the Covid-19 Crisis and their aftermath: new developments concerning fiscal policies and monetary policy

READING LIST

Required readings

R. Baldwin-C.Wyplosz, The Economics of European Integration, McGraw-Hill, fifth edition 2014, chapters 14,16,17,19.

P. De Grauwe, Economics of Monetary Union, Oxford University Press, thirtheen edition 2020, chapters 1,2,3,4,7,8,9,10.

Additional readings

Barro, R. and Gordon, D. (1983) Rules, Discretion and Reputation in a Model of Monetary Policy, Journal of Monetary Economics, 12: 101-21.

De Grauwe, Paul & Dewachter, Hans & Veestraeten, Dirk (1999), Explaining Recent European Exchange-Rate Stability, International Finance, Wiley Blackwell, vol. 2(1), pages 1-31, April.

Reccomended journals

American Economic Review, American Economic Journal: Macroeconomics, Journal of International Economics, Review of Economic Dynamics, Journal of European Economic Association, European Economic Review, Economic Journal, Journal of Monetary Economics, International Finance.

TEACHING METHOD

Lectures’ slides and readings will be made available beforehand to stimulate students’ participation and active interaction. Invited experts during the course will provide real life examples of topics of interest for the class. Extensive use of day to day cases (using newspapers) will be discussed and analyzed with the class, allowing to contestualize the course.

ASSESSMENT METHOD AND CRITERIA

Students can choose between a formative and a summative assessment.

Formative assessment

Students are evaluated by means of two interim written tests, one at the end of module I (first test) and one at the end of module II (second test). Each test consists an open question and an exercise. The final mark of each test will be the weighted mean of the marks reported for the question and the exercise (with equal weights: 50% for the open question and 50% for the exercise). The mean will be rounded to the first integer.

For a PASS in the formative assessment, the following conditions must be met: (i) both tests are mandatory and can only be taken in the dates set at the end of each module; (ii) the mark of each test must be greater than or equal to 18/30. The final mark will be the weighted mean of the marks reported for the first and the second tests (with equal weights: 50% for the first test and 50% for the second test). The mean will be rounded to the first integer.

Students who do not pass the formative assessment are evaluated according to the summative assessment. Even though attendance is not mandatory for a PASS in the formative assessment, it is strongly recommended.

Summative assessment

Students are required to take a written exam during the session dates assigned to this course. The exam will be administered at one time for both modules and it consists of four components: one question and one exercise for each module. The mark for on each module will be the weighted mean of the marks reported for the question and the exercise (with equal weights: 50% for the open question and 50% for the exercise).

For a PASS in the summative assessment at least 18/30 must be attained in each of the two modules.


NEW: Mock Exam - Second Part

Lectures 9-16. Daniele Siena

1. Introduction - Costs and Benefits (learning from the EMU) - Slides (& print friendly version)

References

Chapter 1. De Grauwe, Paul (2014/2016/2018), Economics of Monetary Union. (Tenth/Eleventh Edition), Oxford University Press, Oxford, United Kingdom.

Chapter 14 and 15. Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.

Wolszczak-Derlacz, Joanna. (2006), One Europe, one product, two prices-the price disparity in the EU. Center for Economic Studies - Discussion papers ces0614, Katholieke Universiteit Leuven, Centrum voor Economische Studiën


2. Microeconomic and Macroeconomic Benefits - Slides (& print friendly version)

References

Chapter 3 (3.1, 3.2, 3.5, 3.6, 3.7, 3.8), Chapter 2 (2.1 - 1,2,3; 2.2 - 1,2; 2.3 – 1,2,3). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Barro, R. and Gordon, D. (1983) Rules, Discretion and Reputation in a Model of Monetary Policy, Journal of Monetary Economics, 12: 101-21.

ECB Interim report (2016). The international role of the euro. (June)

European Commission. 1990. One market, one money: An evaluation of the potential benefits and costs of forming an economic and monetary union. European Economy 44 (October).

Krugman, P. (1990) Geography and Trade, Cambridge, MA: MIT Press.


3. Costs and Benefits, Enlargement and Convergence Criteria - Slides (& print friendly version)

References

Chapter 4 (excluding 4.8, 4.9, 4.10), Chapter 7 (7.1, 7.2). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 16 (16.1, 16.2). Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.


4. Fiscal Thresholds, the Eurosystem and the ECB - Independence, Accountability and Transparency - Slides (& print friendly version)

References

Chapter 7 (7.3, 7.4), Chapter 8 (8.1, 8.2, 8.4, 8.5). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 16 (16.1, 16.3, 16.5). Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.

De Grauwe, Paul & Dewachter, Hans & Veestraeten, Dirk (1999), Explaining Recent European Exchange-Rate Stability, International Finance, Wiley Blackwell, vol. 2(1), pages 1-31, April.


5. The European Central Bank and Monetary Policy - Slides (& print friendly version)

References

Chapter 8 (8.5), Chapter 9 (9.2, 9.3, 9.4). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 16 (16.3, 16.4, 16.5, 16.6). Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.


6. Monetary Policy in the EMU, the Global Financial and Sovereign Crises. Conventional Responses - Slides (& print friendly version)

References

Chapter 8 (8.3), Chapter 9 (9.1, 9.2, 9.3, 9.5). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 10 (10.2, 10.3, 10.4, 10.5, 10.6). De Grauwe, Paul (2014), Economics of Monetary Union. Tenth Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 19 (19.1, 19.2). Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.

Daniele Siena (2021). "The Euro Area Periphery and Imbalances: Is it an Anticipation Story?," Review of Economic Dynamics.


7/8. The reponse of European Institutions - Unconventional Monetary Policy + Fiscal Policy and the Stability and Growth Pact - Slides (& print friendly version)

References

Box 8.2 - De Grauwe, Paul (2016), Economics of Monetary Union. Eleventh Edition, Oxford University Press, Oxford, United Kingdom.

Chapter 19 (19.2, 19.3.3, 19.3.4, 19.3.5). Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.

The European Central Bank website

The European Commission website – (e.g. the banking union)

Chapter 17 (17.3, 17.4, 17.5), Baldwin, R. and Wyplosz, Charles (2015), The Economics of European Integration. Fifth Edition, MacGraw-Hill Eucation, Berkshire, United Kingdom.

Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-20, May.

European Commission website – Stability and Growth Pact